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WisdomTree AND SMART BETA

OUR SMART BETA APPROACH

 

It can be challenging to differentiate between smart investment approaches and smart marketing. When it comes to identifying smart beta, we think investors should look for:

1

A rules-based, repeatable methodology that offers broad, representative exposure to an asset class

2

Alternative weighting methods that allow for ample investment capacity

3

High Correlations to established benchmarks

4

An established track record on a total-return and risk-adjusted basis

5

Regular rebalancing

WisdomTree’s first family of dividend ETFs has proven itself for more than 10 years—a period that included an unprecedented market event1.

Dividend-Weighting Equity Markets: 2006-2016

By Luciano Siracusano, Chief Investment Strategist and Jeremy Schwartz, Director of Research


A Decade Of Out-Performance: Inside WisdomTree's Dividend-Weighted Strategies

In this short video, Luciano Siracusano discusses our approach to dividends and how several WisdomTree strategies outperformed traditional beta benchmarks over the past 10 years.

U.S. EQUITY

Domestic Dividends

 

DTD Total Dividend Fund
DLN LargeCap Dividend Fund
DON MidCap Dividend Fund
DES SmallCap Dividend Fund
DHS High Dividend Fund
DTN Dividend ex-Financials Fund
DGRW U.S. Quality Dividend Growth Fund
DGRS U.S. SmallCap Quality Dividend Growth Fund
INTERNATIONAL EQUITY

Developed World EX-U.S.

 

DWM Intl. Equity Fund
DOL Intl. LargeCap Dividend Fund
DIM Intl. MidCap Dividend Fund
DLS Intl. Smallcap Dividend Fund
DTH Intl. High Dividend Fund
DOO Intl. Dividend ex-Financials Fund
IQDG Intl. Quality Dividend Growth Fund
EUDG Europe Quality Dividend Growth Fund
EDOM Europe Domestic Economy Fund
DFE Europe SmallCap Dividend Fund
DFJ Japan SmallCap Dividend Fund
AUSE Australia Dividend Fund

Global/Global EX-U.S.

 

DEW Global High Dividend Fund
DNL Global ex‐U.S. Quality Dividend Growth Fund
GSD Global SmallCap Dividend Fund
DRW Global ex-U.S. Real Estate Fund
AXJL Asia Pacific ex-Japan Fund

 

Emerging/Frontier Markets

 

DVEM Emerging Markets Dividend Fund
DEM Emerging Markets High Dividend Fund
DGS Emerging Markets SmallCap Dividend Fund
DGRE Emerging Markets Quality Dividend Growth Fund
EMCG Emerging Markets Consumer Growth Fund
EMSD Strong Dollar Emerging Markets Equity Fund
EPI India Earnings Fund
XSOE Emerging Markets ex-State-Owned Enterprises Fund
CXSE China ex-State-Owned Enterprises Fund

(Formerly WisdomTree China Dividend ex-Financials Fund (CHXF))

GULF Middle East Dividend Fund
CURRENCY HEDGED EQUITY
HEDJ Europe Hedged Equity Fund
EUSC Europe Hedged SmallCap Equity Fund
DXGE Germany Hedged Equity Fund
DXUS Global ex-U.S. Hedged Dividend Fund
IHDG Intl. Hedged Quality Dividend Growth Fund
HGSD Global Hedged SmallCap Dividend Fund
DXPS United Kingdom Hedged Equity Fund
HDRW Global ex-U.S. Hedged Real Estate Fund
DXJ Japan Hedged Equity Fund
JHDG Japan Hedged Quality Dividend Growth Fund
DXJS Japan Hedged SmallCap Equity Fund
DXJF Japan Hedged Financials Fund
DXJR Japan Hedged Real Estate Fund
DXJC Japan Hedged Capital Goods Fund
DXJH Japan Hedged Health Care Fund
DDWM Dynamic Currency Hedged Intl. Equity Fund
DHDG Dynamic Currency Hedged International Quality Dividend Growth Fund
DDLS Dynamic Currency Hedged Intl. SmallCap Equity Fund
DDEZ Dynamic Currency Hedged Europe Equity Fund
DDJP Dynamic Currency Hedged Japan Equity Fund
CURRENCY

Domestic

 

USDU Bloomberg U.S. Dollar Bullish Fund

Emerging Markets

 

CYB Chinese Yuan Strategy Fund
BZF Brazilian Real Strategy Fund
CEW Emerging Currency Strategy Fund
FIXED INCOME

Strategic Core

 

CRDT Strategic Corporate Bond Fund
UBND WT Western Asset Unconstrained Bond Fund
AGGY Barclays Yield Enhanced U.S. Aggregate Bond Fund

 

Fundamental

 

WFIG Fundamental U.S. Corporate Bond Fund
SFIG Fundamental U.S. Short-Term Corporate Bond Fund
WFHY Fundamental U.S. High Yield Corporate Bond Fund
SFHY Fundamental U.S. Short-Term High Yield Corporate Bond Fund

International

 

EMCB Emerging Markets Corporate Bond Fund
ELD Emerging Markets Local Debt Fund
ALD Asia Local Debt Fund

 

Interest Rate Strategies

 

AGZD Barclays Interest Rate Hedged U.S. Aggregate Bond Fund
AGND Barclays Negative Duration U.S. Aggregate Bond Fund
HYZD Interest Rate Hedged High Yield Bond Fund
HYND Negative Duration High Yield Bond Fund
USFR Bloomberg Floating Rate Treasury Fund
ALTERNATIVE

 

DYLS Dynamic Long/Short U.S. Equity Fund
DYB Dynamic Bearish U.S. Equity Fund
WDTI Managed Futures Strategy Fund
PUTW CBOE S&P 500 PutWrite Strategy Fund
RRF Global Real Return Fund
GCC Continuous Commodity Index Fund

1 Refers to the global financial crisis of 2008 and 2009.

What is smart beta?  

Some define smart beta as simply any type of index that is not market capitalization weighted. In our opinion, there are many types of smart beta approaches, and the ones we believe are attracting the most attention currently are:

 

Equally Weighted Indexes
Components are often selected from established indexes such as the S&P 500 but are equally weighted so that all components have identical weights when rebalanced.

Fundamentally Weighted Indexes
Components are selected to provide broad exposure to an equity market based on market capitalization, but companies are weighted by a fundamental factor such as aggregate dividends or earnings.

Factor-Based Indexes
Components are selected based on one or more fundamental factors and are weighted based on one or more fundamental factors. Factor-based indexes can also be modified equal weighted, where stocks are first divided into tiers based on certain factors and then equal weighted within those tiers.

Low Volatility Indexes
Components are selected because they have exhibited lower volatility than the overall stock market and/or are weighted based on their historic volatility.

THE HISTORY OF SMART BETA

 

Though you may just now be hearing about smart beta ETFs, they have been around for some time. In fact, WisdomTree was an early pioneer in this category, inventing the concept of dividend weighting equity markets.

2006

In 2006, we launched one of the first families of alternatively weighted ETFs, calling them “fundamentally weighted.”

We weighted these first ETFs by dividends because we believe there is a benefit to rebalancing equity markets back to a measure of relative value.

2007

From there, in 2007, we applied the same methodology to the earnings-generating segments of the market to expand our offering.

2014

Today, WisdomTree offers investors smart beta ETFs in all major equity markets around the world.
Dividends are not guaranteed, and a company’s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time.

THE BENEFITS OF SMART BETA 


Investment managers and investors alike are always looking for better ways to invest. Indexing can be highly efficient, and ETFs have a number of benefits that make them a wise way to invest and have led to their quick adoption and impressive industry growth.

Enhanced portfolio returns

Increased dividend income

Reduced portfolio risk

More efficient exposure to equity risk premium1

1Equity Risk Premium refers to the excess return that an individual stock or the overall stock market provides over a risk-free rate. This excess return compensates investors for taking on the relatively higher risk of the equity market. The size of the premium will vary as the risk in a particular stock, or in the stock market as a whole, changes; high-risk investments are compensated with a higher premium.

Past performance is not indicative of future results.

Diversification does not eliminate the risk of experiencing investment losses.

Dividends are not guaranteed and a company’s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time.

THE FUTURE OF SMART BETA ETFs

 

While some industry insiders may worry that smart beta is a fad, investors do not seem to agree. Consider that:

1

U.S.-listed ETFs tracking non-market cap-weighted indexes gathered $65 billion, or nearly one-third of new net inflows, in 2013.1

2

A new study conducted by Cogent Research, a division of Market Strategies International, indicates that more than half (53%) of institutional decision makers will increase their use of smart beta ETFs over the next three years—that’s more than any other ETF category, including market cap-weighted ETFs (48%).2

3

According to Morningstar, ETFs have grown at double the rate of mutual funds since January 2009, with asset growth of 100% and 50%, respectively.3
We believe these findings could lead to smart beta being the largest category of ETFs and the primary driver of ETF growth going forward, perhaps helping them match equity mutual fund assets under management (currently $8.4 trillion)4 in less than a decade.

Interested in smart beta research? Visit our blog.

1Source: "What You Need to Know about 'Strategic Beta,'" BlackRock, 1/15/14.
2Source: Marketwired, 12/11/13.
3Source: Donald Jay Korn, "ETF Asset Growth Rate Sprints Ahead of Mutual Funds," Investor's Business Daily, 10/25/13.
4Source: Investment Company Institute, as of 11/30/14.